First-year Claremont Graduate University student Jamey Keeton may soon be faced with a “crippling” financial decision.
Nationwide, graduate students like Keeton are up in arms about a provision of the Tax Cut and Jobs Act – the Republican tax bill that passed the House of Representatives on Nov. 16 – that would treat tuition waivers, which provide free or reduced tuition, as taxable income.
Keeton, who is pursuing master’s degrees in philosophy and cultural studies, earns $800 a month through a federal work study job as a secretary on campus, and also receives a $12,000 fellowship from CGU.
“If the tax bill passes, they’ll look at that $12,000, and they’ll tax me on it,” he said. “It would crush me.”
Tuition waivers, often part of the financial aid package provided to students seeking master’s degrees or doctorates, are offered in exchange for graduate students serving as research assistants, teaching assistants, or graduate assistants on campus, explained Samantha Hernandez, the legislative director of the National Association of Graduate-Professional Students.
Hernandez, a PhD student at Arizona State University, said students who receive tuition waivers will move up in tax brackets if the House’s tax bill passes.
“If you have a student who makes $14,000, $15,000 a year, they currently get taxed at that rate,” she told TSL. “But if they have a tuition waiver at $30,000 a year, all of a sudden they [will] go from the $15,000 tax bracket to the $45,000 tax bracket.”
Hernandez says such a dramatic shift in taxable income will not be sustainable for many graduate students.
“You don’t make money off of being a graduate student; you don’t make a prosperous career out of it,” she said. “That’s the way it was designed – [graduate school provides] you tuition, provide[s] you a livable stipend, and then at the end you get the job. But this tax situation is assuming that we have the job, currently.”
If the bill becomes law, Hernandez said, NAGPS anticipates “people being less likely to seek graduate degrees, and we anticipate a large amount of graduate students leaving.”
Will Schumacher PO ’18 is one such student. He planned to attend graduate school and work toward a doctorate in philosophy, but the tax bill has derailed his plans.
If it passes, “I would have to figure something else out,” he said. “It’s crazy. It really is.”
“My understanding of it is that my tax bill could go up as much as 200 percent or 400 percent,” he added. “Reading the testimony of these people who are currently graduate students … it seems like it would just not be financially tenable.”
Keeton, who has emailed both California senators and his representative about the issue, said the looming threat of a tax hike has forced him to rethink where he is applying for his doctorate degree in philosophy. He had hoped to attend an out-of-state school, but is now looking at international schools to avoid the tuition waiver tax.
“I already talked to admissions at McGill University at Montreal; I emailed admissions at King’s College in London. I’m looking at new alternatives. This is a new diaspora that’s about to happen,” he said, anticipating a trend of graduate students pursuing higher education elsewhere.
If he’s not able to go to school internationally, Keeton may be forced to make an uncomfortable decision – either swallow the tax increase that comes with a large tuition waiver from an out-of-state school, or go to an in-state institution, which won’t offer as much financial aid.
“It’s like pick your poison,” he said. “Would it be easier if I just take on loans? Do I just take the waiver?”
Keeton said he’s hardly the only CGU student fired up about the issue.
“Almost every seminar it’s brought up,” he said. “I know when it was first announced, when people started to become aware of it, people were lamenting about it in class all the time.”
On Wednesday, thousands of graduate students from more than 50 schools around the country participated in the Grad Tax Walkout, protesting the tax bill. The event was organized by six graduate students from the University of Southern California, the walkout’s website said.
It’s not surprising the issue is widespread: 145,000 graduate students received a tuition reduction during the 2011-2012 school year – the most recent year from which data is available – according to the American Council on Education. ACE wrote to the House Ways and Means Committee on Nov. 6 that it had “grave concerns” about the bill, which ultimately passed 227-205.
“This legislation, taken in its entirety, would discourage participation in postsecondary education, make college more expensive for those who do enroll, and undermine the financial stability of public and private, two-year and four-year colleges and universities,” ACE wrote.
There’s still hope for the thousands of beleaguered graduate students, Hernandez said. The version of the tax bill currently being debated in the Senate does not include a provision that affects tuition waivers.
If that bill passes an anticipated Friday Senate vote, the two bills’ differences will have to be resolved in a conference committee.
“We have a fighting chance going into conference, where the two bills will be reconciled,” Hernandez said. “So our focus is when the two bills come together. We’re working hard to make sure that provision is left out.”